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Canada-U.S. Electric Vehicle Tax Credit Dispute Explained

For months, Canada has voiced opposition to a proposed US law that would introduce tax incentives for US-made electric vehicles (EVs).

Included in US President Joe Biden’s Better Back Building Act is a provision that, if passed, would provide thousands of dollars worth of incentives for certain types of electric vehicles.

Canada opposes this for fear it will negatively impact its auto sector, which is closely integrated with the United States.

That happened on Friday when Canada threatened to impose retaliatory tariffs on the US if the bill passed in its current form.

WHAT IS THE PURPOSE OF INVOICE?

Biden’s Better invoice rebuild includes incentives of up to $12,500 for certain electric vehicles made in the United States and manufactured using union labor.

That figure includes $4,500 for a union-made vehicle and $500 for a U.S.-made battery. Vehicles will have to be assembled in the US by 2027 to qualify for the full $12,500.

The White House has touted the tax credit as something that would reduce the cost of electric cars made in the US for middle-class families, while the bill itself would help America meet its climate goals and create millions of jobs.

The bill, which passed the US House of Representatives and is awaiting passage in the US Senate, is currently divided between 48 Democrats, 50 Republicans and two Independents, both of whom are members of the US Senate. caucus with Democrats. US Vice President Kamala Harris also had an inconclusive vote in the Senate.

WHY CANADA HAS THE OPPORTUNITY?

The federal government has opposed the so-called Buy America provision, arguing that it would cut out Canadian-made vehicles and parts and harm the North American auto industry, including the American auto industry. American people.

Canada also argues that the tax credit goes against the renegotiated NAFTA, or the United States-Mexico-Canada Agreement (USMCA).

In a letter to US Senate leaders and committee leaders on Friday, Deputy Prime Minister Chrystia Freeland and International Trade Secretary Mary Ng said about half of the content involved Canadian-made vehicles. Exports come from the US, with Canadian manufacturers importing more than $22 billion. value of US auto parts per year.

They say the US tax incentives amount to a 34% tax on electric vehicles made in Canada. The two cabinet ministers also proposed that, as a potential solution, Canadian-made vehicles and batteries be eligible for the same tax relief.

However, their letter also threatened retaliatory tariffs and the reversal of some dairy-related trade concessions if Congress approved the incentives.

The move will flare up again as Canada retaliates against the US after former president Donald Trump imposed tariffs on Canadian steel and aluminum imports.

Ng told CTV’s Power Play on Friday that while Canada does not want to impose tariffs, it is prepared to protect the country’s national interests in the event of an unsatisfactory resolution.

“This issue is progressing rapidly,” Ng said. “It’s really important that we communicate very clearly to the United States how much of an impact this will have on Canada.”

There is also the question of where the US auto industry will source minerals and rare earth elements to make EV batteries.

In a letter sent in October to US lawmakers and the White House, Ng said Canada is the only country in the Western Hemisphere that has all the key minerals needed to make EV batteries.

White House press secretary Jen Psaki previously said that they do not believe the tax credit violates the USMCA, but will instead help consumers and encourage electric vehicle purchases.

“The electric vehicle component of the bid is something the president is personally very excited about because he believes it is an industry of the future, an industry that can help create high-wage jobs,” she said. for the union,” she said.

WHAT DOES INDUSTRIAL AND LABOR SAY?

Speaking on BNN Bloomberg’s The Open on November 18, Maryscott Greenwood, CEO of the Canadian American Business Council, said she believes there is “a lot of room” for some deals to be made, proposed tax options implemented by the North American union. Credit.

Others, such as Flavio Volpe, president of the Canadian Association of Auto Parts Manufacturers, have called the proposed incentives “a bigger threat than anything Donald Trump has pointed to.” to us.”

Unifor’s country president Jerry Dias, who heads the country’s largest private-sector union and whose members include those working in the auto sector, wrote an article last month, in There he said Biden was “wrong” to believe that Americans buy American-made electric batteries. vehicles will create jobs.

“These vehicles are built with parts made in Canada and contain essential ingredients like nickel and cobalt from Canada,” he said.

“The reality is that the fates of Canada and the United States are intertwined when it comes to automobiles.”

Earlier this month, Unifor Local president 444, which represents union workers at the Stellantis Windsor Assembly Plant, and Windsor West NDP MP Brian Masse, called on the federal government to increase vehicle incentives. zero emissions to match the recommended incentive in the US.

On November 17, in an announcement in Guelph, Ont., on domestic battery and electric vehicle production, Ontario Premier Doug Ford also said the proposed tax credit violates trade rules.

“We’ll do whatever it takes to get kicked out of this ‘Buy America’,” Ford said. “It will hurt both sides of the border if he continues to do this.”

Featuring files from the Canadian Press, Reuters and CTV News Windsor

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